MGI Pharma shares advance strongly on buyout

NEW YORK (MarketWatch) -- Shares of oncology drugmaker MGI Pharma advanced strongly in Monday's premarket trading after the biotechnology company agreed to be acquired by Japanese healthcare company Eisai Co. for $3.9 billion.

Under the terms of the deal, which would strengthen Eisai's oncology pipeline, Eisai (4523) would acquire all of the outstanding shares of MGI Pharma for $41 a share in cash. The offer is a 22.6% premium to MGI Pharma's Friday closing price of $33.45.

Shares traded up more than 20% at $40.06 in midday dealings.

The merger has been unanimously approved by the board of MGI and is subject to customary closing conditions and regulatory approvals. It is expected to be completed during the first quarter of 2008.

Based in Bloomington, Minn., MGI markets the drug Dacogen, a treatment for a group of blood disorders known as myelodysplastic syndromes. The company also makes chemotherapy products Gliadel and Hexalen, in addition to Aloxi, which is used to treat nausea associated with chemotherapy.

Eisai expects MGI Pharma's
MOGN
marketed and pipeline products in oncology and acute care, as well as its research and development and commercial capabilities, to be a good fit with its existing oncology products, global infrastructure and R&D capabilities.

Following the completion of the deal, Eisai anticipates the transaction will add to its cash earnings per share, excluding goodwill amortization, in fiscal year 2008 and GAAP earnings per share in fiscal 2009.

Eisai intends to finance the acquisition through existing internal financial resources, as well as bank-loan financing, and has secured commitment for the debt required to consummate the transaction.

J.P. Morgan acted as financial advisor to Eisai, and Sullivan & Cromwell LLP is acting as legal counsel. Lehman Brothers was MGI Pharma's financial advisor in its review of strategic alternatives, and Hogan & Hartson LLP is acting as legal counsel to MGI.

Bear Stearns subsequently cut its rating on MGI Pharma. The broker said the $3.9 billion price tag is in line with its previous estimate and sees few rival bidders, given the all-cash nature of the transaction.

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